Your chances of securing a loan will depend on a number of factors which will vary from lender to lender. One of the things some lenders look at is whether your income is stable, as this will impact on your ability to make repayments.
If you are self-employed, your income can fluctuate, which can make securing a loan a little trickier. However, that doesn’t mean you can’t get one – there are still lots of companies that will lend to self-employed people and business owners.
Here are some of the things you need to consider if you want to get a loan when you’re self-employed.
Type of loan
If you are self-employed, there are different types of loan you can apply for, depending on what you need the money for and how good your credit history is.
If you want money to spend in your business (for example, to buy a new work vehicle or IT equipment), then you should consider applying for a business loan. The lender will usually want to check your business accounts to ensure you can meet the repayment terms.
Some lenders, such as banks, also offer start-up loans to new businesses who have a business plan in place.
Personal loans are usually unsecured loans which means you aren’t borrowing against an asset such as a car or property.
Personal loans should be for personal use, not business. Some lenders will specify that you can’t use the money for business purposes, so you should be honest about what the loan is for.
Secured loans are loans taken out against an asset such as your home. If you are struggling to get an unsecured loan, then this could be an option. Make sure you keep up to date with the payments though, or the lender can pursue for legal ownership of the assets or property used to secure the loan.
If you can’t get a loan by yourself, a guarantor loan could be another option. Your guarantor can be a family member or friend who agrees to make payments on your behalf if you default on your payments.